Cold Front Approaching: China gets serious about pharma temperature control

As the truck entered the warehouse, it was unloaded by workers and the cargo was placed on the floor on open platforms. After the pallet was broken down for transport by truck to various locations, the cargo was stored in an open cage, with a few pipes running overhead to supply coolant for the open space. The truck itself also had been open to the elements for much of its journey. Later, when the broken-down contents were arranged for shipment to their final destination, some were strapped on the fenders of open mopeds, which sped off into the evening.

Welcome to the typical “cold chain” storage facility in 21st century China. “This is actually a rather good storage, in our minds, because you don’t see a lot of ice,” said Clement Lam, director of the Hong Kong office of logistics giant John Swire & Sons, during a presentation at last year’s Asian Logistics and Maritime Conference in Hong Kong.

In contrast to the first facility, Lam then showed the crowd images of Swire’s Shanghai facility – “the tip of the arrow” of Swire’s cold-chain network, Lam said – which was a well-lit, secured warehouse with completely sealed storage units for various ranges of temperatures, some as low as -18˚C, and a wide staging area maintained at temperatures ranging from 0˚ to 4˚C. “Apart from the protective gear that you see people wearing, you really don’t recognize that this is cold storage,” he said. “This is a U.S.-style concept that we brought to China.”

With more than 60 years of experience in the cold-chain business, Swire is currently the third-largest cold storage operator in the world, Lam said, and one of their fastest growing markets is China. Swire Cold Chain Logistics now operates five facilities in China, located in the cities of Guangzhou, Shanghai, Langfang, Ningbo and Nanjing, with three others under development in Xiamen, Chengdu and Wuhan. One of the company’s major priorities is to eradicate conditions like the outdated facility described above, and raise China’s cool-chain infrastructure to world-class standard. It seems like a long uphill climb, however.

Still, the payoff of these efforts will likely be worth the toil, thanks to China’s enormous potential for growth in pharmaceuticals. Asia’s share of the global perishables market grew from 13 percent in 2006 to 20 percent in 2015, with pharma making up only about 18 percent of that perishable market. From this low base, pharmaceuticals that require cold-chain care have seen a compound annual growth rate (CAGR) of 7.7 percent over the last 10 years, compared to 4.4 percent CAGR for the entire Asian perishables market during the same period, according to a report by the research firm Seabury Group. Most of this temperature-sensitive pharma traffic passes through China.

While the biopharma market is still considered to be in its infancy in China, the potential is astounding, said Yvonne Ho, the International Air Transport Association’s (IATA) general manager for Hong Kong and Macau. Global spending on cold-chain logistics is expected to reach US$16.7 billion by 2020, making it one of the fastest-growing sectors in air cargo. Leading most of this growth will be China, which Ho named as the number-one country in the world’s top 21 emerging – or “pharmerging,” as she termed it – pharmaceutical markets.

“When Asia and other parts of the world use pharmaceuticals at the same rate as Europe and North America, the total market should be three times larger than it is today,” Ho said.

“So I’m not surprised when [Swire] said many years ago that we want to develop this business in China,” Lam said. “China is a very, very important market for cold-chain logistics.”